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28/11/2018 -IMF want State Pension age increase

pensionersThe International Monetary Fund (IMF) has suggested that the state pension age in the UK might have to rise further the IMF believes hiking state pension age is a key answer to rising life expectancy.

Their UK 2018 Article IV Consultation report, published last week, the fund said the strain on public finances related to the aging of the population will mean making "difficult social choices".

The IMF quoted figures from the UK's own Office for Budget Responsibility (OBR), which estimated public spending on health care and pension benefits would increase by a cumulative 4 percentage points of GDP between 2023 and 2043.

The IMF report does at least acknowledge that other policies may also be needed because state pension age increases “may disproportionately affect groups with lower-than-average life expectancy”.

The UK state pension age for both men and women will rise to 66 by October 2020 and increase again to 67 between 2026 and 2028.

The government has also announced a further increase to 68 between 2037 and 2039, although it hasn’t yet attempted to get Parliament to agree to this.

But there are very good reasons to be concerned about further increases to state pension age.

The first is that we can no longer assume that life expectancy will continue to rise at the same pace.

Improvements over the last century have been driven by childhood immunisations, universal health care, medical advances (such as in treatment of heart disease and cancer) and lifestyle changes, including a decline in smoking.

But there has been a sharp slowdown in the rate of improvement in recent years.

Secondly, the improvements in life expectancy have not been equally distributed, with the wealthiest experiencing the greatest increase.

And there are stark divides between North and South and between postcodes in local areas.

So a 65 year-old man in Harrow is now likely to live an additional 20.9 years – six years more than his equivalent in Glasgow City.

Thirdly, increased longevity does not directly translate into continued ability to work. Healthy life expectancy has also increased, but not at the same rate as life expectancy. This means more years spent in poor health.

So while an English male could expect to live 79.5 years in 2014–16, his average healthy life expectancy was only 63.3 years – below the current state pension age of 65. This means 16.2 of those years (20 per cent) would be spent in poor health.

There is strong evidence that many people struggle to stay in the labour market past their 50s or early 60s regardless of what state pension age is, and that this is often due to ill health.

The result is pension age rises hit the poorest the hardest, which is exactly what happened after the state pension age for women was raised to match that of men.

This doesn’t mean we shouldn’t help those who want to continue working in their later years to do so, whether that be in their 50s or their 70s.

There is evidence that working into old age can be positive for individuals and the economy, but this will require changes to the workplace.

The TUC wants all jobs to be flexible by default in order to accommodate the needs and choices of the worker.

They also want mid-life career reviews to become effective vehicles for ensuring older workers receive the support to continue their careers, and a right for older workers to retrain.

Pat Harrington of Solidarity said: "We need to rethink workplaces so that those who want to continue working find a fit that's right for them but we should not force people to stay in work by making retirement financially impossible."

IMF economists also urged the Government to end the ‘triple lock’ on state pension rises put in place by the Coalition in 2010.

Under the triple lock, pensions are increased annually by either 2.5 per cent, the equivalent of average earnings or the consumer prices index measure of inflation – whichever is the biggest.

Former pensions minister Baroness Altmann said: ‘I do not agree that simply pushing up the state pension age further and further is an appropriate way to deal with demographic challenges.’

Patrick Harrington of Solidarity said: "There are a few practical steps I would urge members to take. First, if you are not in your employers pension scheme you should consider joining it. If you need advice the union is here to help. Second, you should check your National Insurance contributions to make sure you have made enough to qualify for the full state pension. If you haven't you may be able to pay voluntary contributions to fill in the gaps. Again your union is here to advise. Third, you should consider whether you should pay additional voluntary contributions into your pension or take out a Self Invested Personal Pension. It's very important that you consider what provision you can make for older age. I realise many don't have a lot of income to invest but small steps now could make a big difference to your quality of life later."

 

You can check your National Insurance contribution record here: https://www.gov.uk/check-national-insurance-record


 

You can check your State Pension age here: https://www.gov.uk/state-pension-age